Thoughts from a Departing Board Member

On December 31, 2016, FASB Member Daryl E. Buck retired from the Board. Mr. Buck brought a strong private company perspective to the FASB, serving as the Board’s first liaison to the Private Company Council (PCC). On behalf of the FASB and its staff, we thank Daryl for his insights and contributions to the standard-setting process.

Shortly after I joined the FASB in February 2011, I was asked by a reporter if I thought the Board would ever be able to develop accounting standards that meet the needs of private companies.

I told him, “If I didn’t believe it was possible, I would not have joined the FASB.”

Six years ago, the landscape of standard setting for private companies was much different.
Six years ago, the landscape of standard setting for private companies was much different. In my role as CFO of Reasor’s, a private company, I had just completed service as a member of the Blue-Ribbon Panel. That panel was created to address concerns from private company stakeholders about the complexity and relevance of accounting standards to this audience.

The FASB—and the FAF—made it a priority to address these issues and to re-evaluate how the views of private companies are considered in the standard-setting process. In the midst of this setting, I accepted the invitation to serve on the Board—I saw it as a challenge and an opportunity to make a difference.

Since that time, I think the Board has made tremendous strides in improving how we think about and address private company issues. The process is not a one-way street, though.

The Board has made tremendous strides in improving how we think about and address private company issues.
If there’s one thing I have learned throughout my tenure, it’s that change is a collective effort—and that not all private company stakeholders speak with the same voice. But when we work together, we have the best chance to arrive at solutions that are broadly effective.

The Private Company Council, or PCC, has contributed to that success. Since 2012, the PCC rapidly evolved into a cohesive, collaborative group. I was proud to serve as the FASB’s primary liaison with the group, and to work with former chair Billy Atkinson, current chair Candy Wright, and its former and current members.

PCC input helped the Board understand when—and why—there should be differences in private company financial reporting. This was critical in the joint development of our decision-making framework to guide the current and future Boards in deciding when alternatives may be appropriate for private companies.

As a result of the PCC’s work, the FASB endorsed and issued private company alternatives for the accounting for goodwill; applying variable interest entity guidance for leasing arrangements; accounting for interest rate swaps; and accounting for identifiable intangible assets in a business combination.

Our consultation with the PCC also resulted in private company considerations for projects in progress, as evidenced by the Board’s decisions on leases. While private company stakeholders agreed that leases should be reflected on the balance sheet, they also expressed concern about the impact that additional liabilities on companies’ balance sheets would have on debt covenants and on accounting judgments. This was especially true among smaller companies that have debt covenants based principally on debt-to-tangible net worth ratios.

Based on our research and what we heard, we decided that most lease liabilities should be characterized as operating obligations in the financial statements rather than obligations that are equivalent to debt. This decision recognizes that most lease obligations are not treated like debt in situations such as bankruptcy of the lessee. We also provided an extended effective date for private companies so that covenants could be changed in due course.

In the credit losses standard, based on complexity concerns, the Board did not require private companies and not-for-profit organizations to disaggregate credit quality indicators by the year of origination. The Board also delayed the effective date for private companies and not-for-profit organizations—including smaller community banks that do not file their financial reports with the SEC—to give them additional time to implement the standard.

I think the leases and credit losses projects are examples of how the FASB is getting it right—and how continued private company interest and involvement in the process is helping them get it right.

Our work with the PCC helped initiate a significant shift in the Board’s mindset—private company considerations are now part of the FASB’s ongoing process, not an afterthought.
Beyond these individual projects, our work with the PCC helped initiate a significant shift in the Board’s mindset—private company considerations are now part of the FASB’s ongoing process, not an afterthought. As part of every project, the FASB now considers whether a proposed change for private companies might also make sense for public companies and not-for-profit organizations—so it’s really making financial reporting better for all.

I’d like to close by thanking the PCC members and other stakeholders who have contributed their views and insights to our work. Your views continue to be critical to the process, and I encourage you to stay involved.

And last, but certainly not least, I’d like to thank my fellow FASB members and the FASB staff for their professionalism, expertise, and commitment to making standard setting accessible and relevant to private companies. I learned a lot from them, and know that their commitment to making financial reporting better for all stakeholders—including private companies—means that this good work will continue.